New Trends and Risks of Collective Security as a Road to Peace

11 de noviembre de 2009

The fall of the Berlin Wall and the decline of Soviet power during the late nineteen eighties put an end to the bipolar system that characterized the global scenario after World War II. It also symbolized the rise of the United States as the single planetary super-power thus transforming world order into a unipolar system. Notwithstanding the aforementioned, during the past two decades the world has witnessed US’ difficulty in consolidating such Pax Americana. US’ vulnerability evidenced by S-11 was nothing else but a symptom of such difficulty. The never-ending Israeli-Palestinian conflict, the growing tension in the Middle East after Iran’s pursuit of nuclear power, the tensions between India and Pakistan, Russian comeback to the geopolitical battle over natural resources in Asia and South America, the complexity of Iraq’s and Afghanistan’s terrorist threat, the menace of North Korea, among other examples, portray an image under which the US will unlikely be able to guarantee peace on its own in case of need. The US requires of international cooperation to reach its goals. Plus, the startling economic growth of India and China during the past fifteen years has put such countries once again in the first page of world politics. For the first time in more than three centuries world supremacy is heading eastward. A possible interpretation of the world under this trend is that the first decade of 21st century has been characterized by a multilateral system of international order.

Pursuant to the collective security theories of international peace, it may be argued that the new world order is more likely to achieve peace under a collective security scheme, given the following reasons: (a) no country has an hegemonic power as to destabilize world security, provided that the other countries comply with their duties under the covenants of collective security agreements, (b) almost every existing sovereign state in the planet is bound today by the obligations derived from the UN charter, thus reducing risks such as: (i) the possibility of aggressor countries to purchase raw materials and weapons to non-member states of the UN, (ii) the impossibility to impose legitimate sanctions over aggressor countries not bound by the UN Charter, (iii) the possibility of aggressor countries to find new markets for their own products, and (iv) non compliance with the need of pacific solution of controversies between disputing parties; (c) the high value that global citizens give to the reach of peace, thus mobilizing pressure groups which influence their own sovereign states, pursuant to the reach of peace, (d) the increase of information sources and global communication networks, thus improving information asymmetries and civil society’s monitoring activities over public officers, (e) the depth of the wounds left by WWI and WWII, thus compelling nations to prevent future wars, (f) the growth and deepening of regional security and commercial agreements, as additional mechanisms which deter confronted parties of going to war, (g) a shift – whatsoever not so clear – of American foreign policy, from Bush-Cheney’s Unilateralism to Obama’s Multilateral collaborationism, (h) the increasing economic interdependence between world super powers, which would make more costly for them to go to war that restraining to do so, (i) the increasing importance of the ICC as a punishment and deterrence instrument, and (j) the initial success of the UN in promoting a meeting between the US, Britain, France, Germany, China and Russia, to discuss Iran’s nuclear programme.

Certain difficulties seem to arise under this new scope. The ones that I found most relevant are: (a) The pursuit of nuclear power by several countries which – under the sovereign equality principle – have (at least in principle) equal right to use nuclear power (and weapons?), (b) the aggressive attitude of states which read Obama’s Multilateralism as a sign of weakness, (c) UN’s fragility and its impossibility to solve disputes between – or involving the interest of – superpowers, (d) the lack of existence of a world army completely dependent of the UN and not its member states, (e) the lack of institutionalization of a means to impose liability to the UN and its officers for negligence or misconduct in connection with UN’s duty to safeguard peace, (e) the rise of new powers which appeal to their military strength (i.e. China’s military display of weaponry last week in the celebration of the Peoples Republic 60th anniversary) as an implicit message to support their goals, v.g. China’s claim over certain Japanese islands, Taiwan, the South China Sea, or the Indian state of Arunachal Pradesh, (f) the readiness of certain countries, like China (once again), to put their economic self interest (the purchase of millions or barrels of oil and gas each year) ahead of common sense – as the US did in the Italo-Ethiopian affair – by its reluctance to contemplate sanctions against Iran.

The question ahead of us is if the UN really has the power to solve conflicts involving great powers or if it is doomed by the selfishness and egotism of the governments and economic elites of powerful countries? UN’s actions involving Iran, North Korea, China, Russia, and indeed the US, during the next years, will be a clear sign of the future of world efforts towards the reach of peace? Or are we, instead, witnessing the birth of a new world war era, taking into account Russia’s and China’s indifference to Iran’s pursuit for nuclear power? The resemblance between the Italo-American commercial relation before WWII, and the commercial interdependence between China, Russia, and Iran in our times is, to put it clear, frightening.

Joint Enforcement Action and the Iraq Case

miércoles, 11 de noviembre de 2009

The intense activism of the Security Council of the UN pursuant to the restoration of Kuwait’s territorial integrity and sovereignty after Iraq’s invasion as of August, 1990, remains the watermark of joint enforcement action of the Security Council after the end of the Cold War, but its consequences are highly paradoxical.[1] The straightforward resolution with which the Council rejected the invasion of Iraq proved to be an effective tool to enforce Iraq’s withdrawal from Kuwait,[2] but at the same time the Security Council’s intervention came to be throughout time highly criticized.

First, resolution 678 (1990) became a matter of disagreement. The resolution’s authorization to “states” cooperating with Kuwait’s government, to use force against Iraq, unless such country implemented the mandates of resolution 660 before January 15, 1991, was highly controversial. Several members of the Council did not agree on the terms of such resolution.[3] However, the United States promoted what would be the basis of what later came to be known as the Coalition of the Willing, as opposed to the Council’s indeterminacy in decision making in hard cases.[4]

Second, after defeating Iraq, the Council became a de facto administrator of Iraq’s revenues from oil production, as well as a manager of its expenditures.[5] Whatsoever necessary doing such thing could have been, no express justification for doing so derived from the Charter. Third, the embargo conditions imposed on Iraq, as well as the military actions undertaken, derived in a dramatic humanitarian crisis on civilians, without providing a sufficiently legally based trend of action.

Fourth, the issuance of resolution 778 in 1992, which “authorized states to seize revenues from Iraqi petroleum sales and transfer them to the escrow account provided for in resolution 706 (1991)”, seemed to completely exceed the competence of the Council, under the Charter.[6] Fifth, in connection with all the facts abovementioned, the oil-for-food formula became highly illegitimate, and triggered a strong international and domestic opposition against the United States and the Council. And sixth, criticism due to corruption scandals by UN officers and trustees highlighted once again the problems derived from the I-legitimacy of the sanctions imposed over a sovereign state.

The decisions undertaken by the Council after the first days of the invasion, generally viewed, at first glance would seem to have stretched the capacity of the Council to undertake radical measures against aggressor states, as well as to impose harsh sanctions in order to enforce UNs’ Charter, thus endorsing the collective security system.[7] However, if we take a more skeptical look at the facts, we would have to admit that the unity of the Council seemed to have been simultaneously undermined by the authorization to undertake “all necessary measures” to enforce resolution 660 to cooperating states. This is true, as the United States and other states, undertook the measures that they –indeed- considered as appropriate, without the approval of the other members of the Security Council, which throughout time opposed with more intensity to some of the “measures” adopted by the United States on Iraq.

In the end, Iraq’s episode in the early nineties derived in a partial defeat of the collective security system portrayed by the Charter, and in the rise of the Coalition of the Willing, paving thus the road to unilateral intervention which characterized the first decade of the new millennia, under the euphemism of preventive war. Thus, the UN institution was severely hurt, and has been seen since once more as an agent without enough power to deter conflict and safeguard peace.

[1] CANCHOLA GUTIERREZ, Ulises. Analysis of the Resolution Regime of the Security Council. Mexican Annual Review of International Law. Volume 4. P. 88. A close look to the corpus iuris of the Resolutions undertaken by the Security Council is, no doubt, the most extensive, and relevant evidence of the agreement of the member of such Council to undermine Aggression and unlawful attacks to one of the member states of the United Nations.[2] CANCHOLA GUTIERREZ, Ulises. Ibid. P. 96.[3] CHESTERMAN, Simon et. Al. Law and Practice of the United Nations. Documents and Commentary. Oxford University Press. 2009. P. 56.[4] MICIC TAGER, Alexander. El Consejo de Seguridad de Naciones Unidas y la Accion Colectiva: La Cuestion de la Soberania Estatal. Pontificia Universidad Catolica de Chile. Revista Pleyade No. 3. P. 187.[5] CHESTERMAN, Simon et. Al. Ibid. P. 349.[6] CHESTERMAN, Simon et. Al. Ibid. P. 349.[7] CHESTERMAN, Simon et. Al. Ibid. P. 52.

A Triadic Approach to Corporate Governance

11 de noviembre de 2009

Corporate Governance, Promises Kept, Promises Broken (Macey), could be best summarized as a critique to the policies and corporate governance regulations fostered by the administration with the goal of improving governance. Macey argues that the administration has given impulse to certain corporate governance mechanisms and institutions which are rather ineffective, restraining the adoption and improvement of others which do a better job in improving corporate governance and in achieving the ends pursued.

My contention is that the premises over which he builds his argument, even thought might be of general acceptance in the United States, are misleading, as they are incapable of assessing the nature of corporations’ interaction with stakeholders and society, as well as the function of property in it. 

Macey’s view of corporate governance is dyadic. I will call it the Dyadic Theory. This means that he sees corporate governance and its ends as a dual relationship between management (and directors) on one side, and shareholders on the other.

No other actor is involved in this relationship, in which the main purpose of corporate governance is to promote the implementation of the promises-contracts undertaken by management with corporation’s shareholders. This is a mistake that requires a strong critique, as this is one of the pillars over which Macey constructs his argument.

The author admits as a given fact the abovementioned dyadic relation. Even though he is aware of the different standpoint which other countries give to corporate governance and to the roles and persons to which agents-fiduciaries are actually obliged in this regard, in a particularly skeletal argument he devices such different position and admits his own (American) comprehension of the nature of corporate governance, without a broader justification.

By doing so, Macey neglects from apprehending the meaning that the Enron, WorldCom and lately, the Lehman Brothers, Fannie Mae, Freddie Mac, Merrill Lynch, and AIG(to mention a few examples) meltdowns’, has had over the way in which corporate America is seen, and is more likely to be seen, by shareholders and the society, in the present and future.

Such meltdown taught us a huge lesson: corporations and property (need to) comply with a social function. It is unrealistic to say that corporations only keep a relationship with their shareholders. The society also has interest vested in corporation, and has implicitly adopted certain promises which such corporation and vice versa. Society has adopted the compromise of allowing the peaceful and normal development of the company’s activities, and the company has admitted to undertake its social enterprise without generating negative effects and externalities over the society.

The society has, however, allowed the furtherance of such companies, under the assumption that such corporations, as well as the ownership rights which shareholders have over them, will be used in furtherance of the general welfare of society and not only of the shareholders alone. Subsequently, a different argument can be made, whereby corporations have duties and not only rights in regard to society, especially when the company’s social enterprise is likely to have (sooner or later) a negative or positive impact over people different from the shareholders.

Stakeholders, the government and the society, are by means of this argument included within the scope of the actors which would arguably need to play a role over the corporate governance of companies. I will call this, the Triadic Theory. Further, it may be argued that the bigger the corporation is, the larger the interest that stakeholders, government and society, have over its corporate governance mechanisms. The Dyadic Theory of corporate governance cannot be perpetually implemented at the expense of society’s general welfare.


This is particularly true when the corporation’s growth or failure is likely to have macroeconomic impacts over society (e.g. Citibank, Chrysler). If corporations expect that the government (this is, the people by means of the tax they (we) pay) passes bailout regulations and other type of aid to corporations in times of crisis, then it is true that corporate governance cannot be simply about management and shareholders, as it is true that the corporation has assumed certain additional (implicit) obligations, to pursue its activities in a lawful and beneficial way to its stakeholders and society.

When Citibank or AIG pay millions of dollars to its management, few days after the government has spent millions of dollars (of the people) in order to save those companies, than it cannot just be said, that corporate governance is just about shareholders and management. Further, arguably, the right of society over corporate governance does not simply arise in moments of crisis, but rather exists always, as it is apparent that corporations and property have a social function. This argument is thoroughly developed by Von Gierke and Jhering, correspondingly.

All things said, it is crystal clear that underlying Macey’s work, a challenging philosophical, economic, and political issue is at stake, this is: corporate governance is a matter of interest to only two parties (this is shareholders and management)? Or the society has a vested interest in the success of corporations (at least in many of them)? If we adopt the latter alternative, then which would be the mechanisms we should likely prefer?

As Macey puts it, several mechanisms have been implemented as means to fostering corporate governance. Some of them, in my view, respond more to the general interest of society in the company (this is, the Triadic Theory), and others respond more to the Dyadic theory. Thus, the relevant divisions of corporate governance mechanisms do not rely on the effectiveness of said mechanisms, but more in the underlying philosophical question with regard to the function of the state in connection with corporations under the Triadic Theory. The question then is if – under the Triadic Theory – the state should withdraw from exercising and fostering corporate governance mechanisms which do not simply leave to the market sphere the good (or bad) management of corporations.

Mechanisms such as the Securities and Exchange Commission and the Organized Stock Exchange, and the Accounting Rules and the Accounting Industry Regulations, should then be reformed in order to make them more effective, rather than being discarded under not evincing conclusions and arguments. The other mechanisms should be fostered also, but in a different way. This is, they should be fostered in achieving the purposes of Corporate Governance, under the Triadic Theory, with the implications that such approach has.

The first and foremost implication would be that the main end of the corporations and of corporate governance would not be necessarily to maximize the wealth of the shareholders. Rather, such end would be limited by an implicit social norm, according to which the shareholders accept in the moment of incorporation of the company that the maximization of wealth cannot be made at the expense of the society and of third parties. I will call this the Implicit General Welfare Agreement.

The aforesaid is particularly relevant, as its application would have a major impact over the ways in which shareholders, directors and management exercise their roles in certain social enterprises, which, say, generate damaging effects over environment, over health, economic stability, or which foster wars in the Middle East.

This general and rather philosophical assumption needs the support of actual and real mechanisms for this Triadic Theory level of corporate governance. For instance, and as a way of example, I believe that one possible way in which the strongly criticized capture of the boards of directors could be avoided or reduced, by periodically rotating such directors, in order to restrain strong relationships to arise between the latter and management. Further, such measure would solve the problem signaled by Macey, according to which the dual function of directors as advisors and monitors generate the impossibility of an effective control. The schizophrenia annotated by Macey, could also be reduced by adopting Europeans scheme of two types of directors, adding our proposal of rotation every certain period (i.e. one year).

Finally, I believe that creative ways can be found in order to correct the defects of many of corporate governance mechanisms, and they should not be discarded under Macey’s unconvincing critics, which, in addition, depart from a wrong comprehension of the present function that has been granted to corporations.